LTC Bullet: How to Make Medicaid Block Grants Work for Taxpayers, LTC Providers, and the Needy

Friday, February 17, 2017

Seattle—

LTC Comment: The new administration has proposed block-granting Medicaid, but dissenters claim it would hurt the poor, especially the elderly. How to make it work better for everyone, after the ***news.***

*** TODAY'S LTC BULLET is sponsored by Claude Thau, a GA whose proprietary tools help advisors find and educate clients, reducing the “Ping-Pong” in the LTCi sales process. Help clients project their exposure to LTC risk, compare Combo vs. Stand-Alone LTCi easily, and make informed final decisions about buying LTCi in 15-20 minutes!  Change work-site LTCi sales from a series of proposal deliveries to a single interactive consultation!  Claude is the lead author of the Milliman Broker World LTCi Survey, one of Senior Market Advisor's 10 "Power People" in LTCi in 2007, & a past Chair of the Center for Long-Term Care Financing. Contact Claude at 800-999-3026, x2241 or claudet@targetins.com to ask questions or get references. ***

*** THE 17th ANNUAL ILTCI CONFERENCE, with the theme “Navigating the Future,” will convene March 26-29, 2017 at the Hyatt Regency in Jacksonville, Florida. Organizers report continuance of the ILTCI Future Leaders Program, which “is intended to give promising early-to-mid level management and other non-management professionals with leadership potential the opportunity to participate in a half-day pre-conference seminar and networking function at a significant discount from the standard ILTCI registration rate.” For more information, contact info@iltciconf.org. To the same email address, they invite you to “send us questions related to any area of Underwriting, Claims and Sales; the interaction between the areas and how the current and changing State of the Union of LTC has impacted these areas.” Your questions will be answered by a panel of experts at the conference. ***

*** WARSHAWSKY ON THE WARPATH: Mark Warshawsky, who co-chaired the 2013 “Long-Term Care Commission,” has authored a devastating critique of the research used to justify the latest plan for a new government long-term care entitlement. In “The Urban Institute Model of Financing Long-Term Services and Supports: A Critical Review,” he demolishes the intellectual foundations behind the growing consensus that what America needs now is a compulsory, payroll-financed, centrally planned government program to cover the back end long-term care risk. That plan, endorsed by the LTC provider association LeadingAge, the Bipartisan Policy Center, and the ad hoc Long-Term Care Financing Collaborative, was based on research reported in a 2015 Health Affairs article titled Financing Long-Term Services and Supports: Options Reflect Trade- Offs for Older Americans and Federal Spending,” by Melissa M. Favreault, Howard Gleckman, and Richard W. Johnson. Our own critique of that research was published in LTC Bullet: LTC at a Crossroads” on Friday, June 3, 2016. ***

***  LTC CLIPPING SERVICE:  Do you spend a lot, maybe too much time scanning the media to keep up with professional news?  Have we got a deal for you?  Leave that to us.  We’ll find, summarize, highlight and link any news story, report, study or journal article you really need to know and understand.  We’ll email you a quick and concise notice like the one below.  And we’ll field your questions if you need more information.  It’s like having a world-class consultant at your fingertips.  How can you get in on this opportunity?  Contact Damon for details at 206-283-7036 or damon@centerltc.com.  He’ll have you in the loop before you can say “the check is in the mail.”

2/16/2017, “Report: Average annual cost of skilled nursing care breaks $100,000 for first time,” by Emily Mongan, McKnight's Long-Term Care News

Quote: “The average national cost for both private and semi-private skilled nursing facility rooms has jumped again, with the average price of a private room reaching $102,900, according to a new report. Lincoln Financial Group's annual ‘What Care Costs’ study, released Wednesday, shows the national average private skilled nursing room cost jumped 3.3% in 2016, up from $99,600 in 2015. Semi-private room costs reached an average of $89,305, up 2.6% from $87,000 in 2015.

“The Lincoln report also includes a forecast of what the long-term care landscape could look like in 2050, 'when the population of individuals 65+ years of age will have doubled and long-term care services are in even greater demand.’ A semi-private room in a nursing home is expected to reach $206,590 by then.”

LTC Comment: Refer to article to access the full report. ***

 

LTC BULLET: HOW TO MAKE MEDICAID BLOCK GRANTS WORK FOR TAXPAYERS, LTC PROVIDERS, AND THE NEEDY

LTC Comment: Debates over block-granting Medicaid are nothing new. After Newt Gingrich and the Republicans swept into power in 1994, the block grant idea was all the rage. Opposition then as now focused on the consequences of ending the unlimited federal financial support of the rapidly growing entitlement program. Could states shoulder the extra fiscal burden? Would they? How would the poor fare? Especially the elderly poor? Oh my, we could be leaping out of the burgeoning-budget frying pan into the fire of social distress.

Back then, I thought “bunk.” If we cap federal spending on Medicaid, radically reduce federal strings attached to the money, and let 50 states experiment with creative ways to handle eligibility, service delivery, and reimbursement, the result will be better access to higher quality care for rich and poor alike. How and why, you might ask. Well, I laid that answer out in detail, including a model state statute in 1995. Circumstances have changed in the meantime, but not enough to derail the basic plan.

Check it out. I presented the following paper at the 22nd Annual Meeting of the American Legislative Exchange Council in San Diego on August 10, 1995. It was later published in “The Long-Term Care Financing Crisis: Danger or Opportunity? A Case Study in Maryland.”

Long-Term Care Financing Under a Medicaid Block Grant
Notes Toward a Model State Statute

by
Stephen A. Moses

 

I.          Introduction

            Medicaid is known as the "pac-man" of state budgets and the "800-pound gorilla" of long-term care. We all know something has to be done to control this fiscally hemorrhaging giant.

            On the positive side, if Medicaid block grants pass this year, states will have the authority for the first time to implement the proper corrective actions. That is a tremendous incentive to prepare now to meet the risks and opportunities that lie immediately ahead.

            The big questions public policy makers face are what to do and how to do it. We cannot plot a course of corrective action until we understand completely the mess we are in and how we got into it. The purpose of this paper is to explain the problem, show how it developed and propose a solution.

            Medicaid nursing home expenditures nearly doubled between Federal Fiscal Year (FFY) 1988 and FFY 1993. Today, Medicaid pays for 73.7 percent of all nursing home patient days in the United States. At least 85 to 90 percent of all nursing home payments come from Medicaid, Social Security benefits contributed by Medicaid patients toward their cost of care, Medicare, or private patient income (not assets). Dozens of recent empirical studies indicate that Medicaid "spenddown" is much lower than previously believed. In fact, there is no evidence whatsoever of the much-touted, widespread catastrophic spenddown.

            Although Medicaid is ostensibly a means-tested public assistance program, i.e. welfare, evidence abounds that middle-class Americans and even the well-to-do qualify easily for the program's nursing home benefits. Congressional actions (in OBRA '93) to close Medicaid eligibility loopholes and mandate estate recovery have had little effect because of unforeseen weaknesses in the law, sluggish implementation by the states, lukewarm enforcement by the Health Care Financing Administration, and creative end-running by public and private Medicaid estate planning attorneys.

            Finally, Medicaid has developed a dismal reputation for problems of access, quality, reimbursement, discrimination, institutional bias, and welfare stigma. How did America come to provide for the long-term care needs of its proud, self-reliant World War II generation by consigning them to a welfare program that is going bankrupt?

 

II.        Background

            In 1965, America was just starting to have a problem with long-term care. People were living longer, but dying slower of chronic illnesses that caused frailty and cognitive impairment. That was when a prosperous private market in low-cost home and community-based services and long-term care insurance might have developed in the United States. It did not.

            Instead, with every good intention, the new Medicaid program offered publicly financed nursing home care. This subsidy confronted families with a very difficult choice. They could pay out-of-pocket for the home care and assisted living services seniors prefer or they could accept nursing home care paid for by the government. Most people chose the safety and financial benefits of the Medicaid option. Therefore, the market for home care withered, private long-term care insurance expired stillborn, and Medicaid-financed nursing home care flourished.

            The nursing home industry took full advantage of this situation. As fast as the industry could build them, nursing home beds filled with Medicaid residents. Stunned by the cost, Medicaid attempted to control the construction of new beds with Certificate of Need (CON) programs on the principle that "we cannot pay for a bed that does not exist." By the mid-1970's, health planning for nursing homes was in full swing.

            Capping supply, however, only spurred the nursing home industry to drive up rates. Government costs grew faster than ever. So Medicaid capped reimbursement rates too. This compelled the nursing home industry to increase private pay reimbursement rates to compensate. So began the highly problematical differential between Medicaid rates and private pay rates. Today, Medicaid pays only 80 percent of private pay rates on average nationally.

            Higher private rates made Medicaid more attractive to private payers and this led to pressure on legislators to liberalize Medicaid eligibility. A long process of eligibility bracket creep gradually made Medicaid nursing home benefits available even to upper middle class people who had or could obtain the expertise to manipulate eligibility rules. A whole sub-practice of law--Medicaid estate planning--developed to take advantage of this new opportunity.

            With the supply and price of nursing home beds capped by government fiat and with Medicaid eligibility increasingly generous, nursing home occupancy skyrocketed to 95 percent nationally. Nursing home operators realized they could fill their beds easily with low-paying Medicaid patients no matter what kind of care they offered. To achieve adequate operating margins, however, nursing homes had to attract a sufficient supply of full-paying private patients or they had to cut costs drastically.

            If they tried to attract more lucrative private payers with preferred treatment, however, the nursing homes were deemed guilty of discrimination against Medicaid patients. If they tried to cut costs instead, they came under fire for technical violations or quality problems. In response, Congress and state governments pressured the industry to provide higher quality care without discriminating against low-paying Medicaid recipients. Given its fiscal duress, however, Medicaid could not offer higher reimbursement rates to achieve these goals.

            Caught between the proverbial rock and a hard place, the nursing home industry put up a strong fight. Armed with the Boren Amendment, a law that requires Medicaid to provide reimbursement adequate to operate an efficient nursing facility, many state nursing home associations took the battle to court.  By now, however, state and federal Medicaid expenditures were rising so fast and taxpayers were so reluctant to pay for growing public spending that large increases in nursing home reimbursement were out of the question.

            In the meantime, a wave of academic speculation in the late 1970's indicated that paying for home and community-based services (HCBS) instead of nursing home care could save a lot of money. For years, therefore, Medicaid experimented with HCBS waivers as a cost-saving measure. In time, however, hard empirical research showed that (desirable as they may be) home and community-based services do not save money overall. Today, institutional bias remains Medicaid's strongest cost containment tool and one of its gravest deficiencies.

            In a nutshell, just as heavy demand was building for a private seniors housing market in the 1960's, Medicaid co-opted the trend by providing easy access to subsidized nursing home care. Confronted with a choice between paying out-of-pocket for a lower level of care or receiving a higher level of care at much less expense, seniors and their families made the predictable economic choice. Not surprisingly, Medicaid nursing home caseloads and expenditures increased rapidly and drastically. In response, Medicaid capped bed supply and reimbursement rates, which led inevitably to excessively high occupancy, private-pay rate inflation, discrimination against low-paying Medicaid patients, and increasingly serious quality problems.  In time, Medicaid nursing home care acquired its reputation for impeded access, doubtful quality, inadequate reimbursement, widespread discrimination, pervasive institutional bias, and excessive cost. Medicaid remains, however, the only way the middle class can pay for long-term care without spending their savings. That is why so many otherwise independent and responsible Americans end up dying in nursing homes on welfare.

 

III.       The Challenge

            If the foregoing analysis of the Medicaid malaise is accurate, a sensible solution comes easily into focus. To facilitate universal access to top quality long-term care for all Americans, a new, cost-effective, block-granted, publicly financed, long-term care program should have the following characteristics.

            ·       It should save taxpayers money while improving access to quality long-term care for all citizens;

            ·       It should encourage, instead of discouraging, private financing of home and community-based services and assisted living;

            ·       It should encourage, instead of discouraging, the purchase of private long-term care insurance to pay for all levels of extended care;

            ·       It should combine generous eligibility criteria to protect the unprotected with strong incentives for everyone to plan ahead for self-protection;

            ·       It should pay market-based reimbursement rates to assure access to quality care for all participants and to eliminate discrimination;

            ·       It should promote strong market competition between providers of all levels of care;

            ·       It should maximize the number of consumers in the marketplace who have a pecuniary interest in getting the best possible care at the lowest possible price.

Is a single program that combines all these features possible? Yes, but only if it is based on a common understanding and agreement as to its goals and objectives. In the course of numerous research studies over the past 12 years, I have found almost universal consensus on the following ethical foundation.

 

IV.      The Moral High Ground

           We have very limited dollars available for public assistance. We must take care of the truly poor and disadvantaged first. The middle class and well-to-do should pay privately for long-term care to the extent they are able without suffering financial devastation. Prosperous people who rely on public assistance for long-term care should reimburse the taxpayers before giving away their wealth to heirs. Seniors and their heirs who wish to avoid such recovery from the estate should plan ahead, purchase private long-term care insurance, and pay privately for the care of their choice when the time comes.

          What would a publicly financed long-term care program based on this philosophical underpinning look like?

 

V.        Model State Statute for a Senior Financial Security Program (SFSP)

(Rough draft state statutory language is presented below in highlighted italics.) The following are the key components of the program.

          A.        Preserve generous eligibility

                      1. Status Quo

                      Despite the conventional wisdom that seniors must spend down their life savings to receive Medicaid nursing home benefits, the truth is that most seniors qualify easily regardless of income or assets.

                      Most state Medicaid programs place no limit on how much income someone can have and still qualify for nursing home benefits. If your total medical costs, including nursing home care, approximate or exceed your income, you are eligible.

                      The well-known $2,000 limit on assets is meaningless. Medicaid recipients can also keep exempt assets of unlimited value, such as a home [later capped at $500,000 to $750,000 in equity with annual increases for inflation], a business, and a car. Married folks have it even easier than single people. They can shelter an additional $74,820 in assets and $1,870.50 per month in income. [These amounts also increased annually with inflation.]

                      For the truly well-to-do, even these generous limits are easily overcome. Any competent Medicaid planner can deliver Medicaid eligibility almost overnight to practically anyone for less than the cost of one month in a private nursing home.

                      Given Medicaid's generous nursing home eligibility criteria, there is little wonder why most Americans (1) fail to plan ahead for long-term care risk, (2) neglect to purchase private long-term care insurance, (3) hesitate to spend their own money on home care or assisted living, and (4) end up in nursing homes subsidized by Medicaid.

                      2. Senior Financial Security Program

                      Drastically cutting Medicaid nursing home eligibility and coverage for the middle class is not politically feasible. Strong senior interest groups would fight such cuts aggressively and both private and legal services attorneys would tie such a system in knots of litigation. Fortunately, it is not necessary to burn the village in order to save it. The Senior Financial Security Program preserves Medicaid's generous eligibility and coverage. This is the program's biggest political selling point.

                      3. Model State Statute

                      "Seniors who need nursing home care may qualify for the Senior Financial Security Program if their income is inadequate to pay for such care and if their assets do not exceed $2,000 plus certain exempt resources enumerated below.

                      "To qualify for assistance, however, every participant must provide a net worth statement confirmed by a certified public accountant. This net worth statement constitutes security offered by program participants to assure repayment of benefits received. As the participant receives benefits, the cost to the SFSP will be deducted from the participant's net worth ledger. As long as the ledger has a positive balance, the program participant is in receipt of a government-sponsored loan. When the ledger's balance turns negative, the participant converts to 'public assistance.'

                      "Exempt assets that SFSP participants may retain are similar to those permitted by the traditional Medicaid program with a few additional limitations.

                      "Home: no limit on value for one single-family residence, however, expensive homes purchased (or additions constructed) within eight years of applying for benefits will be treated as a transfer of assets to qualify (see transfer of assets restrictions below).

                      "Automobile: one car of any value provided it is actually used for the benefit of the program participant. Transfer of an automobile, even though exempt, will be deemed a transfer of assets subject to penalty. Program participants may not give away exempt assets and replace them with new exempt assets as a means to qualify for assistance or avoid estate recovery.

                      "Funeral plan: one prepaid funeral plan, not to exceed the average cost in the state of a simple service and disposal of remains (perhaps $2,500). Program participants may not shelter tens of thousands of dollars in burial plans as a means to qualify for assistance.

                      "Other exempt resources and limitations to be delineated."

          B. Prohibit divestiture

                      1. Status Quo

                      Under the existing Medicaid program, anyone who transfers assets three years [increased to five years in the Deficit Reduction Act of 2005] before applying for assistance can give away any amount of money and qualify with no questions asked. Unfortunately, the average period of time from onset to death in Alzheimer's Disease is eight years. If the family transfers her assets the first time Grandma forgets to turn off the stove, they guarantee her unlimited Medicaid nursing home benefits three years later with no expense or inconvenience.

                      Today, many Medicaid estate planning attorneys advise their clients and colleagues to initiate a "gifting strategy" years in advance in order to assure easy Medicaid eligibility. Such a strategy may include many tactics including outright gifts, establishment of trusts, retention of life estates, purchase of a partial interest in adult children's homes, and conversion of non-exempt into exempt assets. The options are limited only by the imagination of the Medicaid planner.

                      2. Senior Financial Security Program

                      The SFSP cannot protect generous eligibility and survive without eliminating divestiture planning altogether. Seniors and their heirs must get the message very clearly that long-term care is an enormous financial risk, that people should save and insure throughout their lives to protect against this risk, and that giving away assets for any reason at a time when the long-term care risk is at its peak is a very dangerous proposition.

                      Of course, by birthright, any American is free to dispose of his assets in any way he wishes and at any time. One must no longer be allowed, however, to give away one's wealth in order to compel other Americans to provide oneself with expensive long-term care benefits.

                      Adult children, other relatives, friends and charities to whom older people give away income or assets must realize that if such a gift leaves seniors unable to pay for their own care and dependent on the public dole, that the state will seek restitution.

                      3. Model State Statute

                      "Any assets transferred for less than fair market value within eight years of applying for assistance constitute a debt owing the state (up to the total public benefits paid) and such debt is payable by the transferees who received the assets and/or by the estate of the program participant or by such persons who may have received the assets by means other than a formal probated estate. Any asset transferred in contemplation of qualifying for the SFSP or of avoiding estate recovery shall be considered a fraudulent conveyance.

                      "A transfer of assets is any divestiture of purchasing power including but not limited to gifts, purchase of exempt assets, divorce, purchase of unsalable or undividable property, divestment into trusts, converting assets into joint tenancy, etc.

                      "The intent of this provision is to assure that no purchasing power possessed within eight years of application by anyone who later depends on the SFSP shall be used for any other purpose than the care and maintenance of the owner or reimbursement to the SFSP for providing such care and maintenance.

                      "If any purchasing power shall have been taken from an SFSP participant improperly or illegally, the program shall petition the appropriate court to appoint a private attorney as the participant's conservator (reimbursed on contingency) to recoup the misappropriated assets on behalf of the participant and the program. Such recoupment may include relitigating abusive divorce decrees, reversing improper asset transfers, invading inappropriate trusts, and partitioning undivided property."

          C. Require legal security as a condition of eligibility

                      1. Status Quo

                      Exempt assets divested legally or illegally while on Medicaid are lost forever as a source of long-term care financing for seniors. Nor can such divested resources serve as a non-tax revenue source to the program. Under the existing Medicaid program, states are permitted--but not required--to place liens on the homes of recipients under certain highly restrictive circumstances. Very few states use the lien authority to secure assets for later recovery. Even states that utilize liens have limited success enforcing and collecting on them because of extensive exclusions in the federal law. Consequently, exempt and non-exempt assets held openly or concealed by Medicaid recipients routinely disappear during the period of eligibility either legally or illegally as relatives, friends and others take advantage of the senior's incapacity to relieve them of their resources.

                      2. Senior Financial Security Program

                      No competent financial institution will extend a loan of hundreds of thousands of dollars to anyone without requiring security. The government can no longer afford to do so either. People who expect to depend on the SFSP while preserving substantial income and assets for the support of their dependents must realize and agree that they lose some measure of control over these resources in the process.

                      Of course, all citizens have the option to use their income and assets as they see fit. For example, they can sell their homes and cars to pay privately for long-term care if they choose. But if they prefer to use a public program to pay for their care, they must recognize the obligation to encumber their resources for later recovery, after the resources are no longer needed by their legitimate surviving dependents.

                      3. Model State Statute

                      "As a condition of eligibility for the SFSP, all participants must allow the state to place a lien on their exempt property. The lien shall apply to all real and personal property retained by the participant with the exception of the $2,000 liquid asset exclusion and certain highly private personal property such as original wedding rings.

                      "Such liens shall be officially recorded in the appropriate legal manner and shall be enforceable upon sale of the asset or upon the death of a program participant, or if the participant is survived by a legitimate dependent, upon the death of the last surviving exempt dependent relative (to be defined).

                      "Nothing in this statute shall be construed in any way to prohibit or prevent an SFSP participant from disposing of his property in any way he sees fit. The sole purpose is to assure that his creditor, i.e. the state in the form of the SFSP, knows of the transaction, can recover benefits paid as appropriate, and can terminate eligibility if appropriate."

          D.        Require estate recoveries

                      1. Status Quo

                      For most of the history of the existing Medicaid program, nursing home recipients could preserve unlimited exempt assets in the form of homes, cars and personal property and pass this wealth to their heirs completely unencumbered. It was not until the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA '82) that Congress gave state Medicaid programs the authority to recover from recipient's estates. It was not until the Omnibus Budget Reconciliation Act of 1993 that Congress required estate recoveries. Consequently, few states have so far implemented strong, cost-effective estate recovery programs.

                      2. Senior Financial Security Program

                      As long as Americans can ignore the risk of long-term care, avoid the premiums for private insurance, wait to see if they ever need to go to a nursing home, and if so, get the government to pay while still passing all their wealth to heirs, most people will not pay for their own care and public costs will continue to explode. Extensive research indicates that states can save five percent or more of the cost of their nursing home programs by recovering benefits paid from the estates of deceased recipients. The potential liability of estate recovery provides a huge incentive for future generations to insure privately or pay for less expensive, lower levels of care in the private marketplace in order to avoid or postpone exorbitant nursing home costs. By requiring and strictly enforcing estate recovery, the SFSP assures that those participants, who are able, pay their own way thus preserving their dignity it is not welfare if you pay it back.

                      3. Model State Statute

                      "Every participant in the Senior Financial Security Program must agree in writing to pay back the entire cost of care from his or her estate or from the proceeds of sale of real or personal property during program eligibility up to the total value of the estate or sale. If the program participant should predecease a spouse or other legitimate, dependent heir or joint tenant, the participant's share of any jointly owned property or purchasing power shall be recovered from such third party as soon as it is no longer needed for the maintenance of the dependent, and in any case, no later than upon the death of the dependent third party.

                      "It is expressly understood that the term 'estate' is not limited to the formal probated estate, but includes all purchasing power held by the program participant within eight years of applying for the SFSP in whatever form it passes to another before or after program participation and later death.

                      "The intent of this rule is to assure that people pay for their own long-term care, either directly by retaining providers in the private marketplace or indirectly by reimbursing the Senior Financial Security Program. The financial viability of the SFSP and its ability to provide care to less fortunate participants depends on strong estate recovery enforcement."

           E.        Encourage home and community-based services and long-term care insurance

                      1. Status Quo

                      As explained in the background section of this paper, Medicaid extinguished the private markets for home and community-based services (HCBS) and long-term care insurance when it began providing subsidized nursing home care in 1965. Later efforts to retrofit HCBS and encourage private insurance, i.e., Medicaid waivers and public/private partnerships respectively, have proven to be too little too late. With all its resources sucked into the black hole of institutional long-term care, state Medicaid programs have been unable to fund the HCBS waivers adequately. With regard to long-term care insurance: people do not buy apples on one side of the street when they can get them for free on the other.

                      2. Senior Financial Security Program

                      By prohibiting divestiture of assets to qualify, by requiring liens on all property as a condition of eligibility, and by mandating recovery from estates of every program participant who retains exempt assets, the SFSP creates an enormous incentive for future generations to plan ahead, buy insurance, pay privately for home care or assisted living, and avoid as long as possible starting the meter running for publicly financed nursing home care. Nevertheless, the SFSP should make this goal explicit in the program's statutory language.

                      3. Model State Statute

                      "The purpose of the Senior Financial Security Program is to protect those who are unable to take care of themselves. The program does not replace any individuals' responsibility to provide for their own long-term care. Program requirements that prohibit divestiture of assets, require security for benefits paid, and mandate recovery from estates are expressly intended to encourage all citizens to plan ahead, purchase quality long-term care insurance, pay privately for appropriate, cost-effective levels of care, and rely on the Senior Financial Security Program only as a last resort."

          F.        Educate the public

                     1. Status Quo

                     The main reason that Medicaid nursing home costs have grown explosively for 30 years is that the program desensitized the public to the risk and cost of long-term care. Most people today do not know who pays for long-term care. Medicare, Medicaid or Santa Claus--why should it matter? All the public knows for sure is that someone must pay, because they hear few genuine anecdotes of catastrophic spenddown and they rarely see Alzheimer's patients wandering the streets with nowhere to go and no one to take care of them. Until Americans understand and internalize the risk of long-term care, they will not plan ahead to protect themselves against it and they will continue to end up in nursing homes on Medicaid.

                     Extensive research over the past 12 years suggests that Medicaid nursing home expenditures could be reduced by as much as 15 to 20 percent by persuading the public to pay privately for long-term care either out-of-pocket or by means of insurance coverage.

                     2. Senior Financial Security Program

                     The big challenge to public policy is to provide a long-term care safety net that protects the frail and vulnerable without discouraging the hale and able from planning ahead to take care of themselves. The SFSP achieves this objective by building a downside risk into reliance on public financing of long-term care, i.e. the lien and estate recovery liability, and by aggressively promulgating information about the probability, cost, and personal responsibility of long-term care. To assure that this critical feature of the program is not neglected, the SFSP model statute expressly incorporates a non-tax revenue source to support it.

                     3. Model State Statute

                     "Ten percent (or such proportion as shall be necessary to achieve the objective) of the revenue generated by Senior Financial Security Program's lien and estate recovery efforts shall be used exclusively to support a public education initiative on long-term care. The purpose of this initiative is to educate the public, the medical profession, the bar, the judiciary, financial advisors, and all other individuals in the community who influence the lives of older people, concerning the importance of long-term care planning. Such education and training will include but not be limited to (1) the probability of requiring long-term care, (2) the average incidence, duration and cost of nursing home care, (3) the principles of how to identify and select a reliable long-term care insurance policy, (4) the kinds of free and fee-for-service assistance available to postpone institutionalization (e.g., meals on wheels, chore services, adult day care, congregate care, assisted living, etc.), and (5) the eligibility, lien and estate recovery requirements associated with dependency on the Senior Financial Security Program.

                     "The purpose of this education program is to assure that no one in the state turns 50 years of age without having received complete information on long-term care risk and on all of the private options available to plan for it."

VI.     Conclusion

          Fully implemented and aggressively enforced, the Senior Financial Security Program will empower any state to assure universal access to top quality long-term care for rich and poor citizens alike across the entire continuum from home and community-based services to sub-acute nursing home care while simultaneously saving the taxpayers money and enhancing the private market for all long-term care providers and insurers.

          The goal of the program should be to provide eligibility and coverage equal to or better than conventional Medicaid nursing home benefits at no more than 80 percent of the former cost. In 1993 dollars, this constitutes a savings to taxpayers of approximately $5 billion per year nationally.